Third-straight win for U.S. stocks in doubt as Dow futures tumble more than 100 points - MarketWatch (marketwatch.com)
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A two-day recovery for U.S. equities showed signs of faltering on Tuesday, with Dow Jones Industrial Average futures dropping more than 100 points.
Futures fell ahead of Wednesday’s all-important inflation data, which could reignite the anxiety that helped drive stocks to dramatic losses last week.
What are main benchmarks doing?
Dow futures YMH8, -0.38% slid 136 points, or 0.6%, to 24,448, while S&P 500 futures ESH8, -0.31% dropped 12.20 points, or 0.5%, to 2,643. Nasdaq-100 futures NQH8, -0.39% fell 31.50 points, or 0.5%, to 6,500.75.
On Monday, the Dow Jones Industrial Average DJIA, +1.70% rallied 410.37 points , or 1.7%, to 24,601.27, with 28 of the 30 components trading higher. The S&P 500 index SPX, +1.39% advanced 1.4%, to 2,656, while the Nasdaq Composite Index COMP, +1.56% climbed 1.6%, to 6,981.96.
That marked the second-straight winning session for U.S. stocks, as investors went hunting for bargains after last week saw the biggest weekly losses for all three indexes since 2016.
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What’s driving the markets?
A two-day gain for Wall Street has seen the Dow industrials climb 1.7% and the S&P 500 1.4%. However, the Dow, for example, is still 7.6% off its Jan. 26 high of 26,616.71, and investors remain on edge as doubts fester that last week’s pullback has fully run its course.
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In addition, there was hesitation overseas, with European stocks failing to follow Wall Street’s lead and Asia giving up some gains by the close.
The next big clue for market direction could come from Wednesday’s January consumer price inflation data. There are concerns that if CPI comes in higher than expected, it could spark another selloff, as worries about higher prices and its effect on the Federal Reserve’s interest-rate hiking plans triggered last week’s dramatic volatility and declines.
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Economists polled by MarketWatch are expecting at 0.4% rise for headline inflation, and a 0.2% gain for core inflation, which strips out food and energy costs.
Investors have also been considering a $4.4 trillion Federal budget that U.S. President Donald Trump has proposed, which would see the deficit nearly double in 2017 and rise some $7 trillion over the next decade. Of course, few expect the budget in its current form will be enacted by Congress, especially given it pushes for deep cuts in social programs. But the tax cuts signed into law in December and the spending deal reached last week are already seen ballooning the deficit.
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What are strategists saying?
“A lack of volume yesterday on Wall Street suggests there is not a huge amount of interest in this recovery just yet and may be a signal that this isn’t a reversal in a secondary downtrend,” said Neil Wilson, senior market analyst at ETX Capital, in a note to clients.
He noted that U.S. stock market volumes last week were the highest since August 2011 , while Friday’s rally also saw volumes surge, but that was less the case on Monday. “Lack of volume yesterday suggests we are yet to build consensus around this rally and it could run into trouble if conviction is lacking,” Wilson said.
It’s too soon to say the correction is over, said Konstantinos Anthis, on the research team at ADS Securities. “From both a fundamental and a technical standpoint we need more evidence: yields need to return below 2.5% and markets should look to break above their recent highs which would suggest a reversal attempt,” he said, in a note to clients.
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“Inflation fears haven’t gone away so there are nerves heading into Wednesday’s U.S. inflation data release,” said Jasper Lawler, head of research at London Capital Group, in emailed comments. “We expect markets to stay in a volatile range for the time being. Investors need to be prepared for multiple-hundred point swings up and down in the Dow until markets establish a direction.“
Which stocks are active?
AmerisourceBergen Corp. ABC, +0.29% shares jumped 13% in premarket action after Walgreens Boots Alliance Inc. WBA, +0.00% reportedly made a takeover approach for the drug distributor, according to sources cited by The Wall Street Journal.
Under Armour Inc. UA, +5.78% shares rose 9% in premarket after the sports gear maker posted stronger-than-expected revenue. Blue Apron Holdings Inc. APRN, +2.76% jumped 7.5% after losses that were smaller than expected and revenue beat forecasts .
PepsiCo Inc. PEP, +0.67% earnings are still ahead. MetLife Inc. MET, +0.02% and Baidu Inc. BIDU, +2.77% are due after the close.
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